Best Buy Co Inc (BBY) Teams Up with Apple Inc. (AAPL)

Apple Inc. (AAPL) announces that its Apple Watch will be sold at Best Buy Co Inc (BBY)

Jul 27, 2015 at 12:09 PM
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Electronics behemoth Apple Inc. (NASDAQ:AAPL) will make its Apple Watch available at more than 100 Best Buy Co Inc (NYSE: BBY) stores -- and on the BBY website -- in August. BBY will then expand the coverage to more than 300 of its stores before the holiday shopping crush. The retailer will sell 16 Apple Watch models, along with a plethora of accessories.  Unfortunately for those with more money than sense, the gold-cased Apple Watch Edition -- and its $10,000 price tag -- will not be available.

Is this a Hail Mary from AAPL after its soft revenue forecast and notable omission of Apple Watch figures? Perhaps. However, it should be noted that getting this high-ticket item into 300+ outlets -- not including Apple stores -- ahead of the holidays isn't a bad strategy. 

And, what about BBY? The retailer will give those shopping for the Apple Watch another chance to get a hands-on experience -- which could be seen as a positive. However, we are talking about a watch that carries a minimum price tag of $349. That is a lot of money -- but as AAPL has shown time and time again, there are people who will overlook the high price for the vanity of the latest tech. However, what if there aren't lines of people waiting for the Apple Watch at BBY? They could be stuck with a lot of $599 display models.

Technically, both stocks are struggling. AAPL gapped lower after its disappointing revenue forecast, and is staring up at its bearishly crossed 10-week and 20-week moving averages. BBY continues to fall under pressure (cue David Bowie and Queen) from its own 10-week moving average, and is down 17.5% year-to-date. 

As for sentiment, I am more surprised by the glut of optimism toward BBY. Let's look at analysts first -- 10 of the 17 following BBY rate it a "buy" or better. In fact, eight of the 10 ratings are "strong buys," which leaves plenty of room for downgrades. Plus, the stock's consensus 12-month price target of $42.05 stands in territory not charted since 2013. If the ratings houses finally catch on to this poor performance, downgrades and/or price-target cuts could shove the shares lower.

Analysts aren't alone in their bullish love for Best Buy Co Inc (NYSE:BBY), as the equity's Schaeffer's put/call open interest ratio (SOIR) of 0.55 ranks lower than 86% of those taken during the past 52 weeks. This optimism could easily unwind and further BBY's slump.

Turning to Apple Inc. (NASDAQ:AAPL), perhaps some of the shine has come off this Street darling -- in the options pits, anyway. AAPL's SOIR of 0.72 actually ranks near the middle of the past year's worth of readings. However, there is plenty of optimism from brokerages. AAPL boasts 17 "strong buy" rankings and three more "buys," with not a "sell" in sight. Likewise, the equity's consensus 12-month price target of $147.79 stands in uncharted territory.

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